Purchasing a home is a major life decision and a significant step forward in one's life. If you decide to take out a home loan, you will undoubtedly want to look into the best choices for reducing your debt. The mortgage application process in Dubai is rather simple. You can either arrange a loan directly with a bank or use a broker to help you through the process; in either case, your home loans must be registered with the Dubai Land Department (DLD).
Things to Consider When Comparing Home Loans
Regardless of your residency status, there are a few essential things you should be aware of:
Obtaining Pre-approval
Obtaining pre-approval for a mortgage is required in order to evaluate your budget. When signing the sales agreement, the buyer is expected to pay a particular sum. As a result, obtaining pre-approval before viewing your desired home is recommended for convenience of the process.
Fees
Every loan, whether it's a car loan, a personal loan, or any other type of financing, comes with its own set of fees. Similarly, there are fees associated with home loans. Fees for home loans in the United Arab Emirates typically comprise an application charge, an arrangement cost, and a property appraisal fee. It is also vital to ensure that you are informed of the administration fees that are imposed on an annual or monthly basis.
Rates of Interest
It varies from one bank to the next. Interest rates are divided into two categories.
- Fixed rate of interest
- Interest rate that fluctuates
The fixed rate is set for a specific period of time, but the variable rate fluctuates with the market. The rate is computed differently as well; the flat rate approach charges on the principle amount, whereas the lowering rate charges on the outstanding amount.
Expats and Nationals can get the Best Mortgage Rates in UAE
Expats, who make up a substantial section of the UAE's population, are given first priority. In terms of financial options offered to those arriving from other nations, it is also one of the greatest places to live in. Whether you are a UAE native or an expat, you may take advantage of the advantageous financing options available to purchase the country's most lavish and high-end properties.
Non-residents are permitted to buy leasehold and freehold properties in certain places throughout the Emirates. In Dubai, there are more than 75 freehold neighbourhoods, including popular districts such as Dubai Marina, Palm Jumeirah, Jumeirah Village Circle, Jumeirah Village Triangle, Al Barsha, Downtown Dubai, and Business Bay.
Here are four important tips that will help you get a better deal on your mortgage
Negotiate on the ‘spread’ factor of your Interest Rates
What you need to know is that the interest rate is made up of two parts: the base rate and the spread. If you take out a bank loan, your final interest rate will be the base rate plus the spread. For example, if X bank's base rate is 10% and it offers you a 0.65% spread, your rate of interest will be 10.65%. While the bank determines the base rate, which is also the rate below which a bank cannot lend, the spread factor is something you may negotiate. Look for a lender who will help you reduce risk by simply exposing you to the base rate and keeping the ‘spread' constant. If you want a floating rate, a 'fixed spread floating rate of interest' is the best option. This means that, while the bank's base rate will be reviewed every quarter, your spread will remain constant throughout the loan's term, regardless of interest rate movements.
Call the shots on the EMI
Allowing the bank to choose the EMI component of your loan is a bad idea. Decide on the highest EMI you can afford and stick to it. Most banks will tell you that when interest rates drop, your EMI will drop as well, but don't fall for it because this effectively means you'll be paying a higher rate of interest. Check with your lender to see if you have the option of keeping your EMI the same despite interest rate changes or increasing it at your leisure.
Negotiate the Processing Fee
A lender will always inform you that you must pay a processing charge of 1% or less of the sanctioned amount. If you are a skilled negotiator, you may be able to haggle this charge waiver to your heart's content
Get a Better Understanding of Partial Payments
Part payments are payments that you might make in a single sum to lessen the amount of money you owe on your loan. Your principal is always reduced when you make a partial payment. As a result, by making frequent partial payments, you can dramatically reduce the interest component of your loan. Needless to say, this does not sit well with lenders, and as a result, most banks impose a yearly cap on the number of part payments you can make. When looking for a loan, search for one that lets you to make the most portion payments per year.
Documentation Required for Home Loans in UAE
Individuals in the UAE have the option of obtaining loans for their properties through a variety of methods. It is possible, however, to acquire advance permission from a financial institution to confirm the terms under which they would give you with a mortgage or loan.
You have the option of finalising the mortgage in a simple and straightforward method once you have found a property that you like within your budget. When applying for a loan in the UAE, you may be asked to produce the following documents:
- Proof of your individual/legal residency in Dubai, as well as proof of your residential address.
- Documents confirming that you have a strong credit history are necessary (bank statements, proof of income, tax returns and employment letter)
- Documents needed to demonstrate mortgage affordability.
Different Home Loans/Mortgage Rates in the United Arab Emirates
There are a variety of choices for people who want to buy a home in the UAE using a mortgage or a loan. Individuals can choose from a variety of mortgage solutions offered by financial institutions and real estate companies headquartered in the UAE. A bank account may also be required to receive a loan.
We provide a thorough list of current loan rates offered by various financial institutions in the UAE in this list. You can choose the finest bank in Dubai for expatriates and nationals to receive house loans after examining them:
Emirates NBD
As one of the most well-known financial organisations in the UAE, Emirates NBD offers mortgages worth up to AED 15 million. The loan is for up to 75% of the property's value. Aside from that, those seeking a loan might take use of a pre-approval service.
HSBC
HSBC is yet another large financial institution in the UAE that offers personal loans. Buyers with a monthly income of AED 15,000 are eligible for a mortgage from the bank. These loans are only accessible for specified construction projects.
Mashreq Bank
Mashreq Bank is a financial organisation in the United Arab Emirates that offers loans and mortgages to people. Expats and UAE citizens who are working or self-employed and have a monthly income of at least AED 15,000 are eligible for these mortgages and loans. AED ten million is the maximum loan amount that can be obtained.
Conclusion
When looking to buy an apartment or a villa in the UAE, many people search for 'home loans in UAE.' When expats relocate to the UAE, they want to purchase a property that meets their needs while remaining within their budget. UAE nationals are also on the lookout for their ideal home. Many people are looking forward to applying for a house loan in the United Arab Emirates, thus Dhanguard has created a list of key things to know before doing so.